Previously, customers who purchased the phone for $179 with a new 2-year wireless contract would be required to pay Google an "equipment recovery fee" of $350, while existing T-Mobile customers upgrading to the Nexus One were required to pay $250. These fees have been dropped to $150 and $50, respectively.

"We have been looking for ways to improve our customers' experience, so we were able to work with T-Mobile to find a better solution for our customers," Google said in a statement on Tuesday.

Customers will still be required to pay T-Mobile a separate termination fee of $200 as part of their wireless service agreement should they choose to end their contract after the 14-day grace period; after 120 days the fee is prorated.

Users looking to purchase a Nexus One unlocked without a contract may do so for $529, allowing them to use the phone on any wireless network that utilizes the GSM wireless standard.